1

INVESTMENTOPPORTUNITIESIN CUBA

• Official name: Republic of Cuba • Capital: Havana• Official language: Spanish• National day: 1st January• Area: 110,992 sq. km• Population: 11.2 million• Average life expectancy at birth: 79 years• Infant mortality rate: 4.3 per 1,000 live births (2015)• Public health system: free, open and universal• Literacy rate: 98%• Education: free, public and universal• Index of Human Development: 67 UNDP(2015)

2

ADMINISTRATIVE DIVISIONS: 168 BOROUGHS (INCLUDING THE ISLA DE LA JUVENTUD SPECIAL BOROUGH) IN 15 PROVINCES

MAIN CITIES: HAVANA, SANTIAGO DE CUBA, HOLGUÍN, CAMAGUEY and SANTA CLARA

3

Economic Performance in 2015

• GDP growth 4%• 9.9 % growth in manufacturing industry• 11.9% construction sector• 16.9 % growth in sugar production

4

Foreign Trade by Regions (*)

Americas 52 %Europe 28%

Asia 16%

Middle East, Africa & Oceania 4%a

(*)2014 data 5

Cuba’s Main Trading Partners in 2014

VenezuelaChinaSpainCanadaBrazilNetherlandMexicoItalyGermanyArgentina

6

A base and/or registration in Cuba are not required of foreign firms trading with Cuba.

A foreign firm wishing to establish a commercial presence may opt for :• opening a foreign mercantile company branch, or• entering into a mercantile company agency agreement

Requirements for opening a branch, under Decree 206 of 1996:• 5 years’ existence in the country of origin.• 3 years’ stable dealings with Cuba involving a volume of business

with Cuban firms worth at least US $500,000 p.a. • US $50,000 capital stock.

Trading with Cuba

7

Foreign Direct Investment in Cuba

The promotion of foreign investment is one of the most important tasks in the process of updating the Cuban economic model.

This statement is based on the importance of attracting external resources through FDI, because domestic savings are insufficient to achieve accumulation rates over 20%, allowing to increase steadily the growth rate of GDP.

It has been estimated that to achieve growth rate of GDP from 5 to 7% we have proposed, it is required to attract substantial foreign investment flows annually.

8

In line with the recognizing of the importance of foreign investment for economic development of the country, we have taken actions to enhance it, such as:

The approval of the Foreign Investment Policy

The approval of Law 118, Law on Foreign Investment, and the issuing of its supplementary regulations

The creation of the Special Development Zone Mariel

The conformation of the Portfolio of Opportunities for Foreign Investment

9

10

FOREIGNINVESTMENT POLICY

Some General Principles

Foreign investment is an active and fundamental component for the growth of certain sectors and economic activities.

Foreign Investment is focused on export and import substitution industries, and to eliminate bottlenecks in production lines, favoring modernization, infrastructure development and technological change pattern.

11

Sectoral Principles

The main objectives for attracting foreign capital in selected sectors, are expressed in sectoral policies. Prioritized activities are mentioned and, in some cases, those in which we have not planned foreign investments. In addition, these policies contain other details of interest.

Agricultural and Forest Food Industry Pharmaceutical and Biotechnological Tourism Construction Energy (oil and renewable) and Mines Wholesale Health Industries: Metallurgical, Light manufacturing, Chemical and Electronics Transport Audiovisual

12

13

LEGALFRAMEWORK

The New Legal Framework for Foreign Investment Consists of:

Law No. 118/2014 “Law of Foreign Investment”. Decree No. 325/2014 “Regulations of the Law

on Foreign Investment”. Resolutions No. 46/2014 and No. 47/2014.

Central Bank of Cuba. Resolutions No. 128/2014 and No. 129/2014.

Ministry of Foreign Trade and Foreign Investment.

Resolution No. 16/2014 and 42/14 Ministry of Labour and Social Security.

Resolution No. 920/14 Ministry of Economy Resolution no. 535/14 Ministry of Finance Agreement No. 7567 of the Council of Ministers

in May 2014.

It is published in the Official Gazette of the Republic of Cuba (Special Issues No. 20 and No. 53) from April and December 16th., 2014. 14

Some Peculiarities of the Law Foreign investment may be authorized in all sectors except

health care and education to the population and the armed forces. The exceptions do not include their enterprise systems.

Foreign investors can make their contributions in cash or in tangible and intangible assets.

Foreign investments shall adopt one of the following modalities:

Joint ventures Totally foreign capital

companies (subsidiary, branch office, natural person)

International economicassociation agreement

15

TAX SPECIAL REGIMELAW 118/2014 SDEZ Mariel TAX SYSTEM ACT

LAW 113/2012

On Profits

0% for 8 years, and exceptionally for a

longer period. Then 15%.

0% for reinvested profits.

If natural resources are exploited, it can rise up

to 50% (maximum 22.5%)

0% for 10 years and excepcionally for a longerperiod. Subsequently 12%. Application of Law 118 for

profits reinvestment

35%

On usinglabor force Exempted Exempted Progressive reduction from 20%

(2012) to 5% (2016)

On imports of equipment, machinery and other means

Exempted for the investment process.

Exempted for the investment process

It is fixed in the Customs Tariff

On salesand services

0% for the first year, then 50% bonus on wholesale (1%) and

services (5%).

0% during first year of operations, subsequently

1%

2% on wholesale and 10% on services. New taxable items shall be gradually

incorporated

Special Taxation System (*)

16

TAX

SPECIAL REGIME

LAW 118/2014

SDEZ Mariel TAX SYSTEM ACTLAW 113/2012

On personal incomes topartners orparties

Exempted Law 118 applies 15%

Land tax to contribute to local development

0% duringinvestmentrecovery

Exempted It is gradually set in the Budget Act.

Environmentaltaxes

50% discountduring investment recovery

Law 118 applies

For the use of beaches, waste disposal into hydrographic basins and terrestrial waters: defined in the Annual budget Law

Use of bays and forestry resources to taxable items in Law 113

*Applies only to joint ventures and foreign partners involved in International economic association agreement. Excludes totally foreign capital companies .

Special Taxation System (*)

17

Taxes Applicable to Totally Foreign Capital Companies

Profit tax 35% that may go up to 50% for the exploitation of natural resources

Workforce tax It is gradual reduce until 5% in 2016.

Sales tax 5% on wholesale sales, 10% on retail sales.

Services tax 10% gradual application until 2016

Special productsand services tax

No tax is paid on sales, specially for products and on services for: goods constituing rawmaterial for industrial production; goods and services destined for export

Environmental tax For the use or exploitation of beaches, approved waste disposal in hydrographic basins , for the use or exploitation of bays, forestry resources, the right to use terrestrial waters. Most of these taxes to be established in the Annual Budget Law.

terrestrialcontribution

Gradually established in the Budget Law.

Customs To be set in the Customs Tariffs.

18

Guarantees to Investors The Cuban State shall see to it that the benefits granted to foreign

investors and their investments are maintained throughout the entire period for which they were granted.

They enjoy all-out protection and legal security and could not be expropriated, unless such action is executed for reasons of public or social interest as previously stated by the Council of Ministers.

The State shall guarantee foreign investors the free transfer abroad, in freely convertible currency, free from taxes or any other fees associated to said transfer, of dividends or profits.

They shall be protected against legal claims by third parties or the extraterrestrial implementation of other States’ laws.

The term of the authorization granted for the development of operations could be extended by the very authority that granted it.

19

20

CUBA: A PLACE FORFOREIGNINVESTMENT

Favorable Business Environment Investing in Cuba is favored by:

The political, social and legal stability.

The high educational level and high qualification of the workforce.

The safety climate.

The excellent geographical location.

The existence of policies that prioritize and promote the processes of research and technological innovation.

Access to Cuban domestic market and its consumers, including the tourism and to international markets supported by the international multilateral and bilateral agreements (LAIA, CARICOM, ALBA, MERCOSUR, WTO) in which Cuba is a signatory.

21

22

PORTFOLIO OF OPPORTUNITIES FOR FOREIGN INVESTMENT 2015-2016

The Portfolio of Opportunities for Foreign Investment contains 326 projects to be developed with foreign capital.

The projects included in the Portfolio have been presented by Cuban companies, in line with sectoral development strategies and policies adopted.

Most projects have viability studies or technical and economic pre-feasibility studies, developed by organizations specialized in this activity.

The Portfolio is introduced with information about the benefits of investing in Cuba, data from the existing foreign investment in the country, the general policy principles and a summary of thetaxation legislation.

23

The projects included in the portfolio are distributed in all provinces, including the special municipality of Isla de la Juventud.

The Special Development Zone Mariel has an important weight in the portfolio of opportunities.

24

The Portfolio of Opportunities for Foreign Investment is organized into two sections: Mariel Special Development Zone (ZEDM) contains useful information about the ZEDM and the specification sheets of projects; Investment projects for the rest of the national territory.

Opportunities are grouped by sector: It is divided into 12 sectors. It Includes information of interest to each of them, the approved sectoral policies and the specification sheets of projects.

Each project has a specification sheet showing its main features: Description, modality of foreign investment, Cuban counterpart, the estimated investment amount, location, market, expected results and contact details.

The Portfolio of Opportunities will be updated annually.

25

26

SPECIALDEVELOPMENTZONE MARIEL

The creation of the Special Development Zone Mariel (ZEDM) promotes the attraction of foreign investment.

The ZEDM has favorable location and logistical conditions, especially since the investment in its port and container terminal.

It provides an attractive special treatment for foreign investors, more favorable than the one applied in the rest of the country.

Its operation is regulated by Decree Law No. 313, Decree No. 316 and other regulations issued in September 2013.

27

It is located in the center of trade in the Caribbean and the Americas.Its port is designed with an integrated approach which includes the application of best practices of port marine development and environmental protection.

The Mariel Special Development Zone is placed 45 km west of Havana and has an area of 465.4 km².

28

José MartíInternational Airport

Havana

Mariel

SUMMARY OF BUSINESS OPPORTUNITIES FOR THE ZEDMARIEL AND THE REST OF THE COUNTRY

29www.camaracuba.cu (Opportunities Folder, 2015)

ZED MARIEL BUSINESS OPPOTUNITIES

20 PROJECTS

20 Projects in the Following Sectoring:

Industrial: Production of radial tires; Manufacturing of aluminium cans; Manufcturing air conditioning equipment, Manufacturing light automobiles; Manufacturing valves for pressurized bodies; Manufacturing glass bottles for beverages and various lines of glassware; Engineering and technological products Enterprise(8 projects)

Pharmaceuticals and biotechnology: Manufacture and commercialization of expendable materials for medical use; Plant to produce solid oral medicines (tablets, caplets and capsules); Complex to produce cephalosporins, injectable carbapenemas and oral penicillin; Investment partnerships providing auxiliary services; Biomaterial plants; Plant for producing monoclonal antibodies to produce biodrugs for the treatment of cancer and other chronic diseases; Good manufacturing practices plant for development and production of oral biological medicines; Blood-based products plants - (9 projects)

Agro-foods: Soy processing (refined oil factory); Production of instant dry yeast (2 projects)

Energy: Installation and operation of photovoltaic solar farms (1 project)

30

AGRO-FOODS

38 PROJECTS

Production of beef (2 projects); Pork production, Buffalo cattle production; Poultry meat production,

Rice production; Peanut production Processing and commercialization of elite quality

conventional coffee Making use of biomass for production of vegetal charcoal

(4 projects) Development of the production of citrus and fruits in two

provinces Increased production potential for shrimp farming Industrial processing of cacao and increased production

of chocalatier products Production of confectionary and cereals; Soy sauce

production Increased aquaculture production and its industrialization Increasing the production of sea aquaculture Development of dairy products Increased and diversified production and bottling of fruits

and vegetables Refrigeration and boiler services Production and domestic/international distribution of

Perla del Norte Brand Rum Production and domestic/international distribution of

Cubay Brand Cuban Rum

31

Production and commercialization of products and services for infomatics solutions; of land phones and smart cell phones

Production and commercialization of mesh sacks Production and commercialization of flexible printed

matter Manufacturing and marketing disposable diapers Production and commercialization of footwear Production and commercialization of standart

continuous forms, commercial printed matter and lasser-cut reamed paper Production and commercialization of newsprint and

bond paper Production and commercializaiton of tisue paper and

its conversion Solid urban waste handling system Production and commercialization of car batteries

and UPS and others Production and commercialization of long

productsmade of stainless steel and alloys

MECHANICAL-METAL, LIGHT, CHEMICAL AND ELECTRONICS

INDUSTRIAL

12 PROJECTS

32

Building and commercializing top-quality hotelsand villas in Cienfuegos, Covarrubias, Santa Lucia and Guardalava resort areas

Building and commercializing top-quality hotel accomodations in the Trinidad resort area

Real estate development associated with The Chorrera Ancon Golf Course – Trinidad Ancon resort area

Hotel management and commercializationcontracts

Marina management contracts Extension of Cayo Guillermo Marina, Jardines

de Rey resort area Extension of the Marina Darsena Varadero,

Varadero resort area Extension of the Santa Lucia Marina Santa

Lucia resort area Extension of the Siguanea Marina, Isla de la

Juventud resort area Extension of the Tarará Marina, La Habana

resort area New marina at Trinidad, Trinidad resort área

TOURISM

94 PROJECTS

33

ENERGY

OIL 86 PROJECTS

RENEWABLE ENERGY SOURCES 21 PROJECTS

Risk oil exploration and shared productioncontrats in cooastal water blocks in nationalterritory (8 blocks)

Risk oil exploration and shared productioncontracts in EEZ blocks in the Gulf of Mexico (52 blocks)

Risk oil exploration and shared productioncontrats in terrestrial blocks in nationalterritory (25 blocks)

Secondary recovery contracts for deposits being exploited

Generating electrical energy from forestry biomass

50 MW bioelectrical plants – 16 projects Photovoltaic solar parks in the western

zone:

Wind Farms174 MW Maisi wind farm102 MW Banes wind farm51 MW Gibara winf farm

34

MINING

15 PROJECTS

Project for the exploitation of the Hiero Mantua Copperdeposit

Reconnaissance or geological investigation (prospecting exploration at risk for precious netals – gold and silver –base metals – copper, lead, zinc – and other metals of interest in the central region of Cuba and in the Ciego –Camagüey – Tunas and Sierra Maestra regions

Reconnaissance or geological investigation (prospecting exploration at risk for precious metals (gold and silver), base metals (copper, zinc and ther metals of interest) in the Holguin region

Reconnaissance or geological investigation (prospecting exploration at risk) for chrome and other metals in the Sagua – baracoa massif, and for base and precious metals in the Sierra del Plurial

Geological investigation (prospecting-exploration at risk) for wolfram at the “Lela” prospect

Reconnaissance or geological investigation (prospecting exploration at risk for technical minerals (mica and kaolines) at various prospects on the Isle of Youth

Black tail sand red tails projects, Holguin province Cajalbana project, Pinar del Rio province;

San Felipe project, Camagüey province Repairs and maintenance for mining equipment, Holguin

province

35

TRANSPORTATION

15 PROJECTS

Development, operation and management of portfacilities to receive cruise ships (5 projects)

Operation and management of Astillero del Caribe (ASTICAR)

Modernization of infrastructure and equipment forthe development of bodywork and painting of automobiles in the Motor Centro network of shops

Modernizing infrastructure and equipment for themanufacturing of and repairs to motors and accesories at the José María Pérez UEB Motor Centro

Modernizing and infrastructure and equipment for repairs and for checking fuel injection systems for internal combustive engines in the Motor Centro network of car shops

Exploitation of the electrical railway systembetween the cities of Havana and Matanzas

Operation and management of Astilleros Casa Blanca

Overall management of an urban transportationbase in Havana

Overall management of a transportation base fortourism workers in the cays of the central region of Cuba

36

BIOTECHNOLOGICAL AND DRUG INDUSTRY

1 PROJECT

Extending production of Surfacen®natural pulmonary surfactant

37

HEALTH

3 PROJECTS

Vacation hemodialisis service

International sports medicine and the control and antidoping education clinic

Quality of life services projects

38

CONSTRUCTION

14 PROJECTS

Manufacturing light panels Modernizing engineering systems for construction

and settiing up Building the 400 –room Melia Trinidad Hotel Building the real estate toruism complex for the

“Carbonera Golf and Country Club” Building the real estate tourism complex for the

Bellomonte Golf Course Production of unpainted framing for flooring and

roofing wooden structures Increasing the potential of marble Modernization and expansion of manufactured

bathroom fixtures Converting the Holguin plant for tiles to a single-

firing porous type factory San Jose ceramic plant Manufacture of bathroom fixtures in San José Manufacturing ceramic flooring Manufacturing plaster-based items

39

Marketing hardware and construction materials

3PL Logistical operator for managing chains of refrigerated food suppliers

Wholesale textiles, dry goods, accesories and textile products

Importing and wholesalemarketing of automotive spareparts and accesories

WHOLESALE

4 PROJECTS

40

AUDIOVISUAL

3 PROJECTS

Building and setting up a forum for high-definition audiovisual productions and/or co-productions in Managua (Managua Forum)

Establishing pay-per view channels for Cuban TV

Informatics and audiovisual media foreducation

41

Cuba strongly bets to use the benefits associated with foreign investment to boost the development of its economic model and achieve prosperous and sustainable building socialism to which we aspire.

Important steps have been taken to stimulate the attraction of foreign capital and to promote the business environment in the country. We are committed to solve obstacles that may hinder the fulfillment of the goals we have set.

The Portfolio of Opportunities that we provide will be a useful tool for authorities and entrepreneurs interested in developing business in Cuba.

Conclusions

42

Investment Promotion Institutions

CHAMBER OF COMMERCE OF THE REPUBLIC OF CUBAAddress: Calle 21 no. 661 esq. a calle A, El Vedado, La Habana, CubaTel.: (53 7) 838 1321 / 838 1322 / 838 1452E-mail: proinversion@camara.com.cuWeb: http://camaracuba.cu

CENTER FOR TRADE AND INVESTMENTS PROMOTION - PROCUBAAddress: Calle 10 no. 512 e/ 31 y 5ta. Ave., Playa, La Habana, CubaTel.: (53 7) 214 4345 / 214 4340E-mail: sic@mincex.cuWeb: http://www.cepec.cu

43